Summary:

Free, digital content has shattered long-established ways of making money in the newspaper publishing industry, and publishers must now find new ways to subsidize content-creation costs directly. That includes everything from more-flexible paywalls to borrowing the business models of industries like online gaming and music.

paper

The transition from print to web-based publishing has been rocky for many traditional newspaper and magazine publishers. While online readership has soared, online advertising revenue is a fraction of what print ads once brought in. Print remains profitable, but hard-copy circulation has continued to shrink.

Those scary trend lines have forced publishers to rethink their approach to doing business online, and that includes erecting subscription paywalls. But as I discuss in my latest report for GigaOM Pro (subscription required), simply trying to replicate the old print subscription model online by asking readers to pay a single price for unlimited access may not be the optimal approach to monetizing content online. Rather, publishers need more flexible paywalls that support multiple payment options and multiple content configurations.

In the print world, audiences tend to be demographically and behaviorally homogeneous, so it makes sense to treat all readers as being roughly equal when it comes to their economic value to the publisher. Research cited in the report, however, shows that online news audiences are highly differentiated: Readers exhibit widely varying behavior and widely varied levels of engagement with the publisher’s content.

The vast majority of the unique visitors to most online news sites, for instance, is composed of search-directed “flybys,” who typically have little investment in the publisher’s brand and generate only a fraction of total page views. Most page views tend to be generated by a small slice of highly dedicated readers.

Share of total monthly unique visitors by type of visitor, U.S.

Source: Scout Analytics

Share of total monthly page views by type of visitors, U.S.

Source: Scout Analytics

Those differences have significant economic implications for publishers. Extensive consumer research on related online content industries — music, video, gaming — cited in the report shows that engagement level correlates closely with willingness to pay for content and with the respective levels of price sensitivity among the different groups of users.

Willingness to pay is not a fixed quantity, however. Consumer research and the experiences of related industries show that users who may not be willing to pay full price for an all-access subscription may still be willing to pay for a select bundle of content if packaged and priced appropriately. Racing enthusiast publication Autosport, for instance, offers its subscription content on an à la carte basis online for $1 per article. The pay-per-use offer has led to a 75–80 percent increase in first-time paid users.

Even among those willing to pay, moreover, online content consumers can be highly sensitive to the purchase experience, suggesting publishers could have greater success at converting readers into paying customers by paying closer attention to the online checkout process.

Some of the techniques publishers are finding most effective for converting online content users into buyers, in fact, more closely resemble traditional retail merchandising and e-commerce than they do subscription sales.

By carefully researching the interests and behavior of its online readers, for instance, the Dallas Morning News was able to create a new paid-content revenue stream by packaging all of its high-school sports content into a stand-alone product and offering it separately from subscriptions to the rest of the site.

Finally, not all paywalls need to be consumer-facing. Putting content behind a paywall is a critical first step toward fostering robust business-to-business commerce between content originators and downstream aggregators that would allow all to share fairly in the online news ecosystem. While the platforms and tools to support that market-making function do not yet exist, there is a significant long-term opportunity for entrepreneurs to begin developing them.

For the full in-depth analysis and strategies for monetizing online content, please see the full report at GigaOM Pro (subscription required).

GigaOM Pro will host a webinar, “Building a better paywall,” on Wednesday, Sept. 14. All attendees will get a complimentary copy of the report. 

Image courtesy of flickr user Matt Callow

Comments have been disabled for this post